Former minister for finance Paschal Donohoe felt political pressure from his colleagues in government to spend more “every moment of every day”, he told the Irish Times Inside Politics podcast in his final interview as an Irish politician.
Mr Donohoe, who resigned from his ministerial role after a decade as either minister for finance or minister for public expenditure on Tuesday, said that ministers who sought to persuade him to spend more were just doing their jobs – just as he was doing his by keeping a limit on spending increases.
“If you’re the minister for education and you’re trying to identify how you can meet the needs of building more schools, if you can meet the needs of providing more assistance to those with additional needs, if you are trying to find ways of making meals available in our schools to those who need help, they [ministers] make the case for spending more to do it,” he said.
He said he had always tried to find an “equilibrium” between the demands for more spending, and the need to manage the public finances prudently and sustainably. He said his “conservative” fiscal attitudes were informed by the experience of dealing with the fallout from the financial crash and the era of austerity with his constituents in Dublin Central.
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Paschal Donohoe’s last interview
Mr Donohoe said he was “always worried” by the prospect of corporation tax revenues drying up.
He said the challenge of “protecting the public finances in the event of a shock and meeting the needs of today has on been on my mind every morning”.
He said he had walked into “the building in Merrion Street and left late at night. And here’s the scenario that I’ve tried to build up. So let’s say we are in a scenario where we see a big shock to our public finances. I think it’s most likely that shock would happen over a period of time rather than in a single event.
“We can never rule that out happening. But let’s say it was to happen ... we would be facing into that with a surplus of €9 billion. We, at the moment, collect just over €100 billion worth of tax every year.
“So €8.5-9 billion is the very big first line of defence. We could go all the way to a completely balanced budget, absorbing the loss of €8-9 billion.
“The second thing that would then happen is, let’s say that shock was to hit us in two to three years’ time. By that point in time, we will have approximately €45 billion set aside in two funds ... That then creates the time to manage a shock like that ... And thirdly, even if that then were not to be enough, we would then be moving to a deficit that is very much in line with what countries are currently running at the moment elsewhere within the European Union.”
Asked about criticism from economists that he had not been prudent enough, Mr Donohoe said: “So to those who would make that charge, I would ask them to say, is it reasonable or in any way achievable to be running a surplus of €14-15 billion?
“I’m absolutely certain that were I doing that, the charge would then be made that I’m doing that at the expense of funding public services for a growing population and I’m underinvesting in the economy.
“And I have a pretty fair understanding of the dismal science myself. I would point to the fact that I’ve brought our public finances from deficit to surplus twice. The concept of windfall taxation is one I’ve generated myself. Actually, few things happen by chance when it comes to international taxation, and to be in a level in which we’re at a surplus of just under €9 billion for a third year in a row, in the environment that we’re in, is something I will make the case for.”
As he leaves Irish politics, Mr Donohoe said that he would recommend the life to anyone.
“If anybody came to me, young woman or man, and said, ‘I’m thinking of going into politics’, I would encourage them to do it. I would say enter politics. I’ve now been a politician, at various levels, for 21 years. I’ve contested a Seanad election, a council election, a byelection. And I have contested five general elections, and it is a life I’d recommend to anybody.”
Asked if there was a point at which Fine Gael needed to get out of government and perhaps rejuvenate itself in opposition, Mr Donohoe strongly rejected the notion.
“Opposition doesn’t offer a quick path to rejuvenation, and I’ve never stood on a doorstep saying, ‘I want to serve you in opposition.’ And any politician who does, I’d ask people to consider why you should cast your vote for them.”
Mr Donohoe said that this was his last interview – the last of many – as an Irish politician. He will resign as a TD on Friday and travels to Washington, DC on Sunday to begin in his new role in the World Bank on Monday.
Listen to the full interview here.
